Rustler’s Quickbooks Tips

One thing that the QB help file does not make clear is how it handles the cost of inventory and non-inventory items.

When you buy an inventory item, the cost is added to the total in the account called “inventory asset.”  QB also calculates the average cost of the item based upon the number of items on hand, their cost,  and the new purchase.  One thing to realize is that QB averages cost based upon the life of the file, NOT this year as it should (according to the IRS requirement for perpetual inventory).

When you sell an inventory item, QB takes the total cost of the items sold out of “inventory asset” and sends that cost to the COGS account.

So far all is good.  But QB says you can mark a non-inventory item for resale, when you do that it opens a screen that looks just like the inventory item screen.  You would think, since the screens are the same, that the same thing would happen …. the item cost would be held until it is sold.  NOPE!

When you buy a non-inventory item the cost of the whole purchase is immediately sent to COGS (assuming that is the expense account you selected).  So if you are selling all of what you bought, that is not a problem.  But if you got a deal on a bulk purchase, the whole purchase is expensed - that is just wrong!

If you sell the whole purchase before the year is over, that works just fine.  But if you have some on hand at years end, their cost is still in the expense account - and it should not be.

On top of that, QB will not, does not, carry a balance on hand for non-inventory items even when marked as being for resale.